Question

Norfolk Savings Bank is considering the establishment of a new branch office at the corner of 49th Street and Hampton Boulevard. The savings association’s economics department projects annual operating revenues of $1.6 million from fee income generated by service sales and annual branch operating expenses of $800,000. The cost of procuring the property is $1.75 million and branch construction will total an estimated $2.75 million; the facility is expected to last 20 years. If the savings bank has a minimum acceptable rate of return on its invested capital of 15 percent, will Norfolk Savings likely proceed with this branch office project?